Crude oil futures ease after overnight surge; US crude stocks rise

Crude oil futures were lower in mid-morning Asian trade July 8 as investors booked profits after an overnight surge of 4%.

US inventory data overnight proved to be a mixed bag with a large build in the US crude stocks in the week to July 1, offset by draws in refined product stocks.

At 10:20 am Singapore time (0220 GMT), the ICE September Brent futures contract was down 36 cents/b (0.34%) from the previous close at $104.29/b, while the NYMEX August light sweet crude contract fell 47 cents/b (0.46%) at $102.26/b.

Both benchmarks had surged at the close overnight, with the NYMEX crude marker settling higher by 4.3%, likely as a response to oil prices being vastly oversold earlier in the week, analysts said.

ICE Brent had earlier plummeted by close to 12% over the July 4-6 session.

"Oil prices are coiled like a spring after a significant mispricing," TD Securities analysts said in a late June 7 note. "We reiterate that energy supply risks continue to rise, with the recent selloff more closely tied to a massive liquidation event, likely catalyzed by recession fears, in extremely illiquid trading conditions."

US crude stocks climbed by a massive 8.23 million barrels in the week ended July 1 to 423.8 million barrels, the US Energy Information Administration data showed July 7, amid flagging refinery demand and stronger imports.

ING's Head of Commodities Strategy Warren Patterson noted that after factoring in changes in the US strategic petroleum reserve, total US crude oil inventories fell by a much lesser 2.39 million barrels.

"Domestic refiners decreased their utilization rates over the week by half a percentage point, which would have helped add to the crude build," Patterson added. "However, changes to refined product inventories were more supportive."

Nationwide gasoline inventories fell 2.5 million barrels to 219.11 million barrels over the same period, EIA said, while distillate stocks also saw a counter-seasonal draw of 1.27 million barrels to 111.14 million barrels.

Demand for product had surged on the week. Product supplied for gasoline, the EIA's proxy for demand, climbed to a year-to-date high of 9.41 million b/d, while product supplied for distillates surged 810,000 b/d to 4.38 million b/d, a 15-week high and more than 16% above the five-year average.

Financial markets were also given a boost July 8 by news of the Chinese government giving an infrastructure stimulus to the economy by allowing local governments to sharply raise borrowing.

Dubai crude swaps were higher in mid-morning trade in Asia July 8 from the previous close, though intermonth spreads were mixed.

The September Dubai swap was pegged at $92.21/b at 10 am Singapore time (0200 GMT), up $3.76/b (4.25%) from the July 7 Asian market close.

The August-September Dubai swap intermonth spread was pegged at $3.72/b at 10 am SGT, down 17 cents/b over the same period, and the September-October intermonth spread was pegged at $2.73/b, up 2 cents/b.

The September Brent/Dubai EFS was pegged at $11.78/b, down 52 cents/b.